As Likud Party Appears Victorious, Sharon Will Need to Form Coalition Government

Aired January 28, 2003 - 15:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANNOUNCER: This is a CNN special presentation, ISRAEL VOTES, with exit poll results, in-depth analysis, interviews and live reports from the Likud, Labor and Shinui Party headquarters. And now, here's CNN chief international correspondent Christiane Amanpour in Tel Aviv.

CHRISTIANE AMANPOUR, HOST: Good evening.

Today, Israel is deciding again; the polls have just closed and we're going to get the projections immediately.

But really what happens in Israel is never local. Politics here have an international indication. Whatever happens reverberates around the world.

And perhaps that has never been so significant as now, as the United States President George Bush considers a war against Iraq. That is bound to have increasing implications around this part of the world. We're going to examine that, we're going to go to the party headquarters.

And right now, we're going to go to our political analyst, Chemi Shalev, sitting in our newsroom and watching the first exit polls.

Chemi, what are they saying?

CHEMI SHALEV, CNN POLITICAL ANALYST: What we have here is an amazing victor for the Likud, according to all the polls. The Likud goes up to 32-36 seats. Labor suffers a stinging defeat, according to some polls goes down to 17, to others it's 19.

The centrist Shinui Party scores an amazing upset, going up to 13-17 seats, according to some polls, and Shas going down by four seats or five seats.

And as to the complete picture, the complete blocks, we have to wait and see.

AMANPOUR: What we've been saying all along this week is that, in fact, the winner has never been in doubt. The polls have given Ariel Sharon a commanding lead throughout this campaign, for most of it, anyway.

But what is going to happen if their historic rival, Labor Party, goes down to the kind of defeat that they're projecting right now, and what kind of coalition are they going to be able to put together?

SHALEV: Well, we have to wait and see the exact numbers. We have here the psychology of the numbers in Labor. If they stay at about 17, 18, first of all, Amram Mitzna will have to work hard to maintain his leadership.

And in any case, he will refuse to enter a national unity government and we should have -- we'll see the numbers as time goes by -- Sharon should have a narrow coalition within his grasp easily, but that's not what he wants. And so we'll have to wait and see what sort of tactics he's going to use in order to try and coax both Mitzna and Shinui to join his government.

AMANPOUR: All right. Let's go straight now to the Likud Party headquarters, where our Jerrold Kessel is standing by.

Victory there, celebration yet, Jerrold?

JERROLD KESSEL, CNN JERUSALEM DEPUTY BUREAU CHIEF: ... about winning, but worried winners, because of the day after. But for now, there's no sign of worry here.

The absolute delight of the Likud faithful here and those numbers that went up on the three television screens of the three projection visuals television stations, showing that the Likud has virtually double, if not more than double, of the Labor Party.

But the problems remain. Beyond the delight, the initial delight, everybody knows, speaking to all, they know the problems. Maybe it's not as much of a nightmare as they'd feared, but it will begin tomorrow when Ariel Sharon has to try to put together a viable coalition, the kind of coalition he won.

But for now, they're going to celebrate. They're going to celebrate what they will see as very much a victory -- Christiane.

AMANPOUR: It's a little difficult to hear you with all the celebrating going on in the background.

We're going to go now to Kelly Wallace at the Labor Party headquarters. If the projections are accurate, Labor has gone down to a historic defeat, if it remains below 20 Knesset seats.

What is the mood there, dare I ask, Kelly?

KELLY WALLACE, CNN CORRESPONDENT: You can hear some singing behind me, people trying to lift their spirits.

But as you said, if those initial polls are correct, Labor Party, the party that founded the state of Israel, about to suffer its biggest election defeat ever.

And so it raises enormous questions for the future of the party and the future of its leader, number one. Will Amram Mitzna remain the leader of the party? Number two, will the party, as Amram Mitzna has been saying, be out of any Sharon-led coalition government? And if you want to think about the future troubles for this party, just look at one recent newspaper poll. Among first-time voters, exactly 0 percent, Christiane, backing the Labor Party -- Christiane.

AMANPOUR: Kelly, thanks. And noisy there, as well. Let's see what it's like at the Shinui headquarters. This really has been the surprise of this election. The secular party of Tommy Lapid, who has spoken out very vociferously against joining any kind of coalition with the ultra-orthodox.

Matthew Chance is there.

MATTHEW CHANCE, CNN CORRESPONDENT: Thank you, Christiane.

And a great deal of celebration here at the Shinui Party headquarters, also in Tel Aviv. A sense of excitement that has been heightened, of course, by the appearance of these exit polls, which give the Shinui Party between 14 and 17 seats in the new Knesset.

This is still to be confirmed, of course, but it's a big improvement on what they did have. They had just six seats in the last Knesset, so is this a major development for the Shinui Party.

Amid all of this celebration and there is quite a lot of it here. It's a very rowdy, very festive evening, we have Elan Labovich (ph), who was number 13 on the candidate list, definitely going to get in.

But these predictions of 17 Knesset seats, this is way, way more than you were anticipating, isn't it?

UNIDENTIFIED MALE: Yes, yes. That's true. It's much more than what we anticipate at the beginning, but it's great. It's a great feeling. You see what is going on around here.

CHANCE: To what do you tribute your success tonight? Was this just a protest vote against the two main political parties or is this anti-orthodox agenda one that has genuine resonance with the people of Israel?

UNIDENTIFIED MALE: I think it's a combination of both of them. The protest against the two big parties and the anti-orthodox feelings of the people of Israel for -- in the few last years.

CHANCE: What about the issue of coalitions, because there's going to be a lot of horse trading behind the scenes, I expect. There already is a lot of horse trading behind the scenes.

Your party has ruled out forming or entering into a coalition with the ultra orthodox Shas Party. Labor has ruled out forming a coalition with the Likud Party.

How do you see, if this many seats are given to the Shinui Party, you fitting into a coalition?

UNIDENTIFIED MALE: We said all through the campaign that we want to see a national unity, secular coalition with the Labor, the Likud and Shinui. Definitely, we would not go with Shas. We'll see what will happen in the next few days.

CHANCE: You say definitely not with Shas. Not with the ultra orthodox party. But what if there was a national emergency? What if a war in Iraq demanded that there should be a government of national unity?

Would you consider entering a government with Shas in the interest of national unity?

UNIDENTIFIED MALE: I think it is early to predict the -- we'll wait and see what will be the -- all the political maneuvers in the next few days and then we'll decide. It's too early.

We say through all the campaign, not with Shas. We want to have a national unity government with the Labor, Likud and Shinui, and that's what we will try to get to our job in the next few days.

CHANCE: Now, your leader, Tommy Lipid, has said that the Shinui Party could form a bridge in terms of the Israeli/Palestinian conflict between attitudes on the right wing of the country and attitudes on the left.

How do you see your party forming -- making this bridge between the left and right in the country?

UNIDENTIFIED MALE: That's exactly -- Shinui is a center party. We are people and some of our ideas of us are from -- coming from the Labor and some of them are coming from the Likud and that's what makes us the bridge between the Likud and the Labor.

Curious, indeed, Bill. And what is most on people's minds is what's going to happen tomorrow. What kind of a government is Israel going to see?

BILL SCHNEIDER, CNN POLITICAL ANALYST: Well, we don't know if it's going to be a broad paced government of national unity. That is clearly what Ariel Sharon wants.

But this election is important, because the kind of government that Israel is electing today will determine the prospects for peace.

Now, how can we be talking about piece? The Labor Party, if it does as badly as everyone expects, Labor really ran on the Oslo peace process. And this election could confirm that Oslo is dead.

Well, this is where the war with Iraq could come in. Because if the war with Iraq is successful and Saddam Hussein is overthrown, it will open up new prospects for peace. And Ariel Sharon wants to be the man who negotiates that deal.

He wants a broad-based coalition. He does not want to depend on a narrow base of right wing parties, because he wants maximum flexibility.

AMANPOUR: And if he's unable to pursue that and if he has to go into a coalition with right wing religious parties and forms a narrow government, what kind of pressure does that put on him, vis a vis his relations with the U.S., with the rest of the world, particularly at this time?

SCHNEIDER: It will be very difficult for him, because he will have no flexibility. He will have a very small coalition. It's unlikely to last very long, and he will have no flexibility to make the deal that President Bush proposed in June of 2002, a deal that involves a Palestinian state.

Every time President Bush talks about a new peace initiative, he talks about a Palestinian state. And Ariel Sharon has indicated a willingness to at least consider the possibility of a Palestinian state.

AMANPOUR: And some of these potential coalition makers would not consider that.

President Bush, this administration's worst nightmare, surely, at this precise time, as it contemplates further action in the Arab Islamic world, is to have a government that could further inflame feelings down here?

SCHNEIDER: That's right. And that's exactly what a narrow right-wing government would do. And so oddly, Ariel Sharon is trying to create a government of national unity. In his victory statement tonight, he's indicated that he will reach out to the Labor Party.

Oddly, what's happening is the Labor Party doesn't want to go into that government of national unity and the Shinui Party, another coalition party, says it won't go into a government unless it's a government of national unity. So his options are very limited.

AMANPOUR: OK. Bill Schneider. We'll be back with more analysis. We have to take a short break now. We'll be back in a short while.

(COMMERCIAL BREAK)

AMANPOUR: Well, a turnout of over 50 percent would be big in the United States or in other parts of Western Europe. Here, it's low. Usually, they have something like 80 percent turnout.

We're now going to go to Mike Hanna. He's our Israel bureau chief here and has covered this story for a long time.

It looks as if Labor is going down to an historic defeat. What is that going to mean in terms of how you cover this story, how it's going to be perceived and what's going to happen on the ground?

MIKE HANNA, CNN CORRESPONDENT: Well, it means there are going to be new political alignments in this country that it has never experienced before.

The key issue at the moment, and what we're waiting for, is to see how the blocks play out. To actually start getting all the numbers together of the various parties and see which way this government is going to form.

We know it is going to be Ariel Sharon that forms the government. However, it is then a matter of arithmetic. His key figure, in terms of his block, is in the region of 70 votes, remembering that you've 120 seats in this Knesset, or parliament.

Seventy votes in terms of a very solid right wing block would give him an absolutely stable government for the four-year period, the first time this has happened for a very long period of time.

But what that means, as well, is that it's a totally different government from what Sharon himself has said he wants. He wants a government of national unity, very broad-based, and in a way, and in Sharon's frame of reference, a centrist government.

He wants a government that he is able to engage with the United States. He is able to move a step forward in terms of -- into a negotiation process. This is what Sharon says he wants. With the type of right wing block that may be emerging here, he may not be allowed to do that by the force of his government, no matter how strong it is.

AMANPOUR: Well, let's be very clear, then. What would these coalition, potential coalition partners do that is so against what Sharon has said he'd do?

HANNA: Well, some of the parties on the extreme right, who would be part of that rightist block, will have nothing to do with the Palestinians. They will not accept Sharon's implicit recognition of a Palestinian state, for example. That, of course, then completely ties his hands.

But we may be a bit ahead of ourselves here. We need to look at the blocks themselves. We need to start putting the numbers together in terms of what that final figure is, where we've got these projections having Labor somewhere between 17-19.

Now, that is very important. If it is, indeed, 19 rather than 17, because these figures, as they come out, it is going to be one seat or two and the difference between whether or not he forms a stable government that will last, the arguments and eruptions that are going to go in here.

So I think it's going to be a little bit longer before it's going to become clear what type of government Sharon is going to attempt to form. Then he's got to go about forming it.

AMANPOUR: Mike, thanks very much.

We're going to go down again to Likud Party headquarters, where Jerrold Kessel is.

Jerrold, what is it that Sharon is going to say, do you think, in his victory speech tonight?

KESSEL: Well, Christiane, we're going to hear from not quite the horse's mouth, but very close to it in a second.

Certainly, just want to tell you all those dilemmas that Mike Hanna and Bill Schneider were talking about are out of the window here. Here the party has begun. They're not interested in tomorrow for the moment. The party with a catchy jingle, the nation wants Sharon. That's what they're singing here.

And we're joined now by the minister of education in Mr. Sharon's outgoing government, Limor Livnat. Pretty delighted, I imagine you are this evening?

LIMOR LIVNAT, ISRAEL EDUCATION MINISTER: Yes. I believe that the Israelis have said tonight yes to the prime minister. This is a real victory of the conservative parties, and the electorate, Israeli electorate, said today yes to Prime Minister Sharon, yes to the Likud Party.

And they have rejected the policy of Labor Party, which is for concessions without unilateral possessions, without any alternative without any peace.

KESSEL: Now, the slogan was the nation wants Ariel Sharon. But what kind of government does the nation want, and is that the kind of government Mr. Sharon will be able to deliver to his own voters and to the Israeli people?

LIVNAT: Well, first of all, I have to tell you that we face big challenges in front of us. And we have to stay united in order to overcome these challenges. And I believe...

KESSEL: (UNINTELLIGIBLE).

LIVNAT: Yes. I believe as Prime Minister Sharon has said before, and he kept saying it all along the last two years, and remember, he won twice in overwhelmingly victory.

So we have said before, and he's saying now, I want to create a unity government. I hope very much and I believe that we will be able to create a unity government because there is more that unites us than what divides us. KESSEL: If he isn't able to create a unity government, does that mean he won't be able to do what he said he'll be able to do, and which you said was the Likud's policy not to make concessions. Make the right kind of concessions.

In other words, carry out the strategic corporation with President Bush that Mr. Sharon said he had if he doesn't get Labor in?

LIVNAT: I think that you can be quite sure that Prime Minister Sharon, as in the past, will accomplish what he has just said the last two years.

And I believe that Labor Party plus, or maybe or Shinui Party will get together with Likud to create a unity government.

I believe that we will be able to go on, but you have to remember one thing. That the Israelis have said today that they are ready to make concessions for peace. They're not ready, though, to commit suicide for a false peace.

KESSEL: Do you think the United States, President Bush has anything to worry about that perhaps, it will be a period of instability in Israel in the Israeli government at a very, very sensitive time in the Middle East?

LIVNAT: I hope very much that there will be stability. We're all worried from instability. That's why we call this Israelis now to come and vote for Likud in order to make stability.

It's not easy, I know. The Israeli system, democratic system is quite complicated, but you know, it's better than not having democracy, so...

KESSEL: Thank you very much.

LIVNAT: I hope very much that we'll be able to go on with President Bush.

KESSEL: Thanks very much, Limor Livnat, the minister of education. Very close to prime minister Ariel Sharon.

But for the moment, it still looks as if Ariel Sharon will have to ward off that nightmare in constructing a viable coalition of the kind that he wants and of the kind that, perhaps, President Bush wants, as well -- Christiane.

AMANPOUR: Jerrold, thanks.

Let's just try to put some of this in context now. All the analysts, all the newspaper articles, all the reporting basically is saying that the people are putting their trust for the future into a man who basically has presided over some of the bloodiest years in Israel and by every indicator some of the worst performances, whether it be economic or anything like that.

I was a talking to one voter today who told me he was on the way to vote for Ariel Sharon. He always votes Likud.

And I said, "So, on security do you think he's done a good job?"

He said to me, "No, and furthermore, I don't even agree with some of his positions. I believe we should pull out of the settlements."

So, let me ask our political analyst Chemi Shalev.

Chemi, what is it that's making people vote for Ariel Sharon again?

SHALEV: I think there are several reasons.

First of all, you could say that he's being elected by default. He stands above any contenders that he may have, and especially Amram Mitzna, who was considered to be inexperienced. He has no rival for his charisma, for his history as a general.

And Israelis, even if they think that Sharon has not succeeded in eradicating terror, they nonetheless consider him to be a tough guy. They want a tough guy at the head of the country.

And one of the things that we're seeing here in these results, also, is the rightward shift of the entire populus after two years of the Intifada and Palestinian terror.

AMANPOUR: Hemi, it seems as if they're saying that they don't blame Ariel Sharon for what's been going on over the past couple of years and that they still believe that he's the man to be able to bring them to some kind of safety and security.

SHALEV: Yes, that's true. Sharon has succeeded. He once was considered to be on the right wing fringes of the Likud.

But in the past two years, he has succeeded in projecting himself as a centrist moderate candidate, centrist moderate prime minister, one who is willing to theoretically achieve, at least theoretically, achieve peace with the Palestinians on terms that are acceptable to a majority of Israelis.

Whether these terms are realistic in the objective sense, that's another matter altogether.

But Israelis believe that if anybody can move things forward, it is Sharon.

AMANPOUR: OK. We're going to take a short break now, and then we'll go back to Labor headquarters and ask them, why is it that so many Israelis back the ideas of the Labor Party candidate but they don't want to vote for him? After a break.

(COMMERCIAL BREAK) AMANPOUR: The fact is that most Israelis say that they would transfer, or rather, accept a swap of land for peace and that they do back many of the ideas that the Labor Party candidate, Amram Mitzna, holds.

Amram Mitzna, in an interview with me a couple days ago, said it's a big question, I don't understand why so many people back my ideas but they are not willing to vote for Labor under my leadership.

We're going to go back now to the Labor Party headquarters and CNN's Kelly Wallace, to see whether that question can be better answered.

WALLACE: Well, Christiane, the Labor Party here trying to put a brave face forward after suffering, really, if these polls are correct, its biggest election embarrassment ever.

Joining me now, Yali Tamir, member of parliament for the Labor Party.

First, your reaction to these polls right now. It looks like the Labor Party has done the worst it's ever done before.

YALI TAMIR, LABOR PARTY: Yes. It's a very difficult day for all of us, but we believe that we have the right way for Israel, the right way to come out of the crisis in which we are right now, and we'll fight for it. If we won't be in the government we'll fight for it in the opposition.

WALLACE: What went wrong, though? Because as Christiane was saying, her interview with Amram Mitzna, most Israelis say they support his ideas, but it seems many people couldn't back his ideas or couldn't back him just now. Why?

TAMIR: Well, first of all, he's a very new leader, became the leader of the party only two months ago. We had a problem of people really not knowing him, not being able to trust him in such a short period of time.

But we're also paying a price for the failure of the peace process, of the failure of the Camp David, of the huge wave of terrorism, the whole peace campaign, Israel has suffered a tremendous blow in this election.

We will have to prove to the people of Israel our way is still, despite our difficulties, the only one and the right one and we'll have to fight for it.

WALLACE: What about the future, though? Will the Labor Party absolutely, 100 percent, stay out of any Sharon-led coalition government?

TAMIR: That -- all the leadership of the party made it very clear commitment not to go into a Sharon government. We already -- we've been in this government. We know what Sharon can do and is willing to do. He is not willing to evacuate settlement. He is not willing to move out of Gaza. And therefore, we will have to fight him from the opposition and support him if he does some good moves that we approve.

WALLACE: OK. Yali Tamir, thank you.

So Christiane, big questions now for the Labor Party and its leader, Amram Mitzna, as it tries to move forward from here. Back to you.

AMANPOUR: Kelly, thanks. And back to Mike Hanna.

Amram Mitzna also complained that there was anything but unity amongst his people, his own party, as he became party chairman, that he didn't have enough time.

And the real fact of the matter is that so many Israelis, even those committed to peace, simply say they don't want to give a vote to Labor and reward the Palestinians for these two years-plus violence here.

HANNA: There is an element of that behind it. All observers and most of the things we picked up in the streets. There's very much that sensibility, a sensibility that Sharon himself has gone away to create, saying that any form of negotiation with the present Palestinian administration is a reward, as Sharon would put it, for the violence that has raged in the region for awhile.

But it's going to be very difficult within the Labor Party.

Let's just quickly look at the arithmetic that we've got from these opinion polls. With Labor, with those projected seats, Shinui with those projected seats and the Likud with those projected seats, you have a coalition, a centrist -- within Sharon's terms -- secular coalition of over 70 seats, or 70 seats. That is a very powerful coalition.

But Labor will not join in the coalition, so it says, and we've heard it now from a very senior minister. Again, whether it can hold that position, given these facts that we are beginning to see now, is one matter.

If Labor still refuse to, then what Sharon has to be doing is looking at, all right, I've got Shinui with me. Then he has to look to the ultra religious, probably 13-16 seats, we're hearing, for Shas. But Shinui will not sit with Shas.

Once again you move into that inevitable position that Sharon will find himself in. Is that to get that really solid block, he is looking to the right, which he does not want to do.

So the key in a way, even at this early stage, would appear to be the biggest loser. The biggest loser in terms of seats lost is labor. But labor still have the key to what kind of government Sharon is going to form, despite the fact that it stands so badly. So once again, it's many, many twists and turns. And what we're hearing from labor at the moment could well change in terms of public pressure alone, because the one thing that the Israeli public wants, and we've heard this time after time after time, is a strong government. They're sick and tired of going to going to the polls, and they are sick and tired of an electoral process that brings them nothing but another election.

AMANPOUR: Would you say the Israeli people are big losers too, since they have said over and over again in the campaign that what they want more than anything is a national unity government?

HANNA: Well, once again, you'd expect a national unity government to be able to give direction to a political process and to a regional situation that you find yourselves in. Because of the political ructions over the past three years since 1999, because of the nature of the conflict that has raged here as well, you have not had a government that has given any sense of direction. It has been a government of stasis. The Ariel Sharon moves whatever he has tried to do, or not done, as Sharon has made absolutely clear he will not negotiate with the Palestinian Authority in its present guise.

But at the same time, there is nothing to offer the Israeli public. There is a sensibility of this -- underlying this, perhaps, pointed out in the percentage poll that we're seeing, a very low percentage poll. A degree of not apathy, probably anger, disgust from the political process that is not giving direction.

And once again, we're getting back to the scenario where Sharon has been seeking the political base over as wide a spread as possible to give some kind of direction not only in terms of the conflict with the Palestinians but in terms of an economy that is in shambles and in terms of Israel's place in the wider community, the wider region, and in the face of potential U.S. attempts to regime change in Iraq.

There are many factors at play here. But what is underlying it all is the need for a strong government that provides some form of political direction. And as the figures that we are seeing at the moment, that is possible, but in terms of the attitudes that are expressed at the moment, it is not.

AMANPOUR: We'll explore a lot more of that with a key ally of Ariel Sharon when we come back after a short break.

(COMMERCIAL BREAK)

AMANPOUR: So we've been talking about what challenges will face the likely new Prime Minister Ariel Sharon the day after this election. Joining us now, Likud party member Zalman Shoval, and former ambassador to the United States.

We've heard a lot about what the Israeli people want, what they have not gotten over the last couple of years. What is Ariel Sharon going to be able to do as the head of the new government to give the Israelis what they want? Peace settlement, proper economy, less joblessness? ZALMAN SHOVAL, FMR. ISRAELI AMBASSADOR TO U.S.: Christiane, Sharon I think is going to send three very important messages in the Knesset, first of all. And that's what the people of Israel said today. To the United States, you're going to have a prime minister in Jerusalem who will continue to work hand in hand with you, with the Bush administration.

To Europe, Sharon has been elected by a big majority. You've got to reckon with that. And to the Palestinians, Ariel Sharon wants to make peace with you, and he's the guy who can deliver. So better try cooperating with him, because if you're going to wait and wait and wait, you're not going to get anywhere.

AMANPOUR: Mr. Shoval, as we have seen, there have been no negotiations for more than a year or more now. And if it is true that he will have to go into coalition with parties that don't even recognize the future of negotiations or a Palestinian state, can you tell me how he's going to deliver to the Israeli public, to the Palestinians, that you've just outlined, and to the president of the United States?

SHOVAL: Well, you know, there are other things in the Middle East beyond the Israeli-Palestinian conflict. There are other things on which I think Israel under Sharon and America see things eye to eye. But your question is a good question. And Sharon wants to have a wide-ranging government, a national unity government, if possible, at all.

It's not going to be easy, but the size of his victory, which is beyond anything expected in the polls, will make some of the smaller parties, I think, think twice before they'll try to make all sorts of conditions to Sharon to join the government. But obviously, Sharon would like to see labor in the government. Right now, labor says it won't.

There may be different circumstances. The country may be (UNINTELLIGIBLE) from them. As a matter of fact, I think one of the reasons why labor lost so badly was because Mr. Mitzna said he's against a national unity government under Sharon. People in Israel want to have national unity, so they voted against Mitzna.

AMANPOUR: Now what kind of pressures is Ariel Sharon under from within his own party? We know there's a lot of in-fighting (ph), a lot of back-biting (ph), a lot of jockeying for position. What kind of pressure is he under from within his own party, your party?

SHOVAL: Well you know this victory, I think, must be seen as a victory for Sharon more than a victory for Likud, although they're both together. And therefore, I think people are going -- at least initially -- are going to respect what he really wants. It's not going to be easy. There's opposition to the matter of Palestinian statehood, what sort of Palestinian entity and so on.

And you know you asked a question before. One of the main tasks of the new government will be to look at the economy, which is in dire straits, but I think Sharon will put the economy as one of the first items on the agenda. He should, anyway.

AMANPOUR: And, of course, you know that in the weeks before this election day, there was these allegations of scandal that rocked not only the Likud Party but Sharon himself. He obviously denied these things. Are they going to come up again? Is this going to be something that's going to come up and bite him in the back jus after he's won an election?

SHOVAL: Well (UNINTELLIGIBLE) they made headlines, as everybody knows. How much substance there was in that, only the future will tell. The legal branch of the government, the attorney general, police, and so on, I hope there's really nothing in it. I hope it was just politics. But who knows? We're going to see.

AMANPOUR: We'll wait and see. Thank you very much, Ambassador Shoval.

SHOVAL: Thank you.

AMANPOUR: And we're going to go now to a break. And when we come back, back to the different party headquarters, and also to the West Bank.

(COMMERCIAL BREAK)

AMANPOUR: Welcome back. We are going to show you some pictures of the Shinui Party headquarters, I think. Yes, there we have live picture at the surprise success of this election.

Tommy Lapid, a fiercely secular party leader, and you can see all his people there waving placards and banners. I think he has already entered the fray there. Perhaps in the distance underneath one of those placards we can see his gray head of hair. In any event, he has said that if he gets the significant number of seats that he was projected to have, that he thinks he could affect the shape of the next government.

Chemi Shalev, well there he is. Thumbs up, waving. Chemi Shalev, can Tommy Lapid actually shape this new government, or is he going to just be a strong party that sits out of government, depending what Ariel Sharon does?

SHALEV: Well, first of all, it depends on the final numbers. According to some of the polls, Sharon can comfortably set up a coalition without Shinui. But according to other polls, it may be too close for comfort, and then Lapid will become a potential king-maker.

He may also have another pivotal role as the man who may potentially bring in labor if Sharon opts to go for Shinui rather than Shas. And because of the numbers that we have here, and because Shinui has turned into the third largest party, I wouldn't rule out the possibility that Sharon will at least make an attempt to make an historic break with the ultra orthodox and to try to get labor in through Shinui. If he does that, Amran Mitzna will find it an offer that is almost impossible to refuse to join what is the dream of most Israelis, that is, a secular national unity government. AMANPOUR: And you really think that's possible, given Ariel Sharon's historic ties to the ultra orthodox and Likud's ties to the ultra orthodox? You think -- you just said that, according to the numbers, he would be able to make a comfortable coalition. Would he dump the ultra orthodox?

SHALEV: Well, that depends. First of all, the dynamics of coalition building are such that they're really unpredictable. And Sharon's party, and especially people who look to the future, such as Benjamin Netanyahu, will be opposed to Sharon (UNINTELLIGIBLE) with Shas. Nonetheless, we must take into account the public pressure here.

The public does not want a narrow right wing government, even if it has 65 or 70 members. And so as the days go by, there may be increased public pressure on Sharon, on the Likud. So I wouldn't rule it completely out.

AMANPOUR: All right. Let's listen a little bit. He may just have finished. But let's see if we have some translation of what Lapid is telling his supporters.

YOSEF "TOMMY" LAPID, SHINUI PARTY LEADER (through translator): I don't want to have to out-shout people. We have to be sober and reasonable. This evening, we can rejoice. But we have to reflect on the fact that we and our friends, our old and our new members of Knesset, have a vast amount of responsibility placed on their shoulders and we must not miss this historical opportunity. This historic opportunity that the people have given us.

We have run a clean electoral campaign without zigzags. We have laid down our goals very carefully and we have stuck to them. We will fight religious coercion and every single Jewish man will be enlisted in the armed forces.

We will fight for the rights of the middle class. And those who pay taxes in this state are also due something from it. We shall fight the corruption which has swept over every single part of the electoral spectrum, left and right equally. And we shall constitute a bridge between the left and the right in order to have a balanced and intelligent policy that will lead us to peace and security in the face of the Palestinians.

Ladies and gentlemen, our first task is to set up a secular unity government.

AMANPOUR: Well there you have Tommy Lapid telling his supporters what he's told them all through this campaign, that he will insist on a secular government, that he doesn't want to try to go into a unity government. That he will, if he's in government, make sure the exemptions, the historic exemptions for the ultra orthodox against joining the army, in some cases paying taxes, in some cases employment, will be reversed. He is determined to roll back several decades of what he calls and what his party calls state subsidized Judaism, saying that it is unfair that the majority of the people of Israel should subsidize the minority of people who are exempt from, as I say, military service and other such services.

Jerrold Kessel is next. We go to him at Likud Party headquarters. Jerrold, what's new there?

KESSEL: Well, Christiane, the party in full swing here. If there was a meter that could be monitoring smiles here, it would be breaking all kinds of records. As we can see the jollity very high level.

But there are some who within the Likud leadership who are not really putting a damper on that, but are putting a sobering voice on it. One of them, the man who Ariel Sharon has charged to be his political strategist in negotiating with the outside world, with the United States, with the European community, and to try to work out future peace moves as they will be, Dan Meridor. A short while ago, he told me something very interesting. He said, this isn't the real world, referring to the joy and the delight.

Much as a delight as the Likud is, the real world is out there in what President Bush wants, what President Bush needs, he said, and what that roadmap, that so-called peace plan that's being devised by the quartet, the United States, the United Nations, Europe and Russia, for the Middle East. And he said, that's the reality, and that's the real world, and Ariel Sharon knows that.

But that's what Dan Meridor seems to think where the prime minister will be going. He says that will be probably be reflected in his victory speech this evening. We know that the prime minister has just, a few minutes ago, received word, a phone call from Amran Mitzna, the labor party leader, not really conceding defeat, because it's not a question of labor conceding defeat to one party to another, but acknowledging and congratulating Mr. Sharon on his victory. And the two men, Mr. Sharon said, that will meet very shortly, according to the prime minister's office.

We're joined here by Uzi Landau, one of -- I dare say the people in the Likud Party who argued for a more tougher policy towards the Palestinians. Mr. Landau, thanks very much for joining us. You're a minister in Mr. Sharon's outgoing government. Do you believe that his eye is fixed more on what the United States needs, more on what the world community needs, in terms of peace process with the Palestinians, or in terms of the way the electorate has voted tonight?

UZI LANDAU, ISRAELI MINISTER OF INTERNATIONAL SECURITY: Well, it's quite obvious that our interest goes along with more peace and security in the area. And it goes along together with the interests of the United States and the world community. The issue is, of course, what is going to bring peace to this area.

Now what's happening here in this hall, as much as in many more halls in Israel, is a quite clear signal, message that all those parties that have been calling for an ongoing campaign to eradicate terrorism have won this election. And the future government will draw its support from these parties. And we will build this peace in the Middle East.

KESSEL: With a Palestinian state, as Mr. Sharon says?

LANDAU: Well, this -- again, the road map hasn't yet been presented and hasn't yet been discussed in the government. And as much as in the road map, there are many important elements for peace and security, there are still a number of elements there that might hurt peace and security and they will be discussed.

KESSEL: OK. Thanks very much. I think you get a sense there of some of the dilemmas that Mr. Sharon will still be facing, despite this enormous victory that he's scored here tonight -- Christiane.

AMANPOUR: Jerrold, thank you very much. And when we come back after a short break, we'll go to CNN's Ben Wedeman in Ramallah on the West Bank. The Palestinians, too, are monitoring these elections.

(COMMERCIAL BREAK)

AMANPOUR: Welcome back. In this exit poll, projections continue to come in. It appears that the Meretz Party, the left wing, pro- peace, pro-civil rights party here, has gone down to what could amount to a historic defeat, going down and losing half the number of seats it has had in the previous and the present Knesset. And Yossi Sarid, the iconic leader of that party is saying that if the projections prove true, he will resign.

Let's go now to Ben Wedeman in Ramallah. Ben, the Palestinians are monitoring this election. Is there any sense you can pick up of any kind of soul searching amongst the Palestinians, whether the leadership or the people, that they made have had a hand in the current mood in Israel and the current election results?

BEN WEDEMAN, CNN CAIRO BUREAU CHIEF: Well, there is a realization that the violence of the last two and a half years between the Palestinians and Israelis has been critical in making it possible for Ariel Sharon and the Likud Party to win this fairly impressive victory. Of course, many people here will put the blame on the Israelis, but there are elements in Palestinian society who have been soul searching now for many months, in fact, looking at the damage that has been caused by suicide bombings against Israeli civilians and other sort of tactics that really have reached no conclusion or no benefit for them.

And we've seen, for instance, over the last few days in Cairo, Egyptian officials trying to bring the Palestinian factions together to work out some sort of cease-fire. And of course, those attempts were a failure. In fact, they were inconclusive.

But many Palestinians indeed do believe that the tactics of the intifada, the violent tactics in some instances, have been a mistake. And there are attempts ongoing among Palestinians in the West Bank and Gaza to come up with nonviolent ways to resist the reoccupation, as they describe it. However, they don't really take the blame completely for the results that have come out of the elections in Israel tonight -- Christiane.

AMANPOUR: Any sense, despite the pressure from the Israeli leadership and the United States leadership, any sense that Palestinians themselves, perhaps they won't say this publicly, but that they understand the need for reform within their own leadership as they attempt to go forward?

WEDEMAN: They're well aware of the need of reform. And we saw just a few months ago the Palestinian legislator not approving the cabinet proposed by the Palestinian leader, Yasser Arafat. There is a realization that corruption has to be fought. The new finance minister of the Palestinian Authority is leading that effort.

There is a real effort to sort of clean up house here. But the Palestinians will say that under the current conditions with the Israeli forces all around Palestinian cities, that it's very difficult at this time -- Christiane.

AMANPOUR: Ben, thank you very much. And thank you to all our viewers in the United States and around the world watching Israel decide at this most critical time in the Middle East and in the United States. I'm Christiane Amanpour in Tel Aviv.

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